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During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: $ $ Sales (@ $63 per unit) Cost
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: $ $ Sales (@ $63 per unit) Cost of goods sold (@ $43 per unit) Gross margin Selling and administrative expenses Net operating income Year 1 945,000 645,000 300,000 296,000 14,000\ Year 2 1,575,000 1,075,000 500,000 326,000 174,000 $ *$3 per unit variable: $251,000 fixed each year. The company's $43 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($380,000 - 20,000 units) Absorption costing unit product cost Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Units produced Units sold Year 1 20,000 15,000 Year 2 20,000 25,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year
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